To get a car loan after a repossession, get your finances in order, rebuild your credit and consider finding a co-signer.
If your car has been repossessed, you were likely behind on payments, and probably have blemished credit as a result. Repossession is one of the most serious negative entries that can appear on your credit report, so obtaining future financing will be a challenge. Shore up your credit prior to applying for a new car loan to help ensure you not only get financed, but get a competitive interest rate.
Get Your Finances in Order
Potential lenders will want to see you cleaned up your financial act and are taking care of whatever issues lead to your repossession. For example, if your car was repossessed because of a job loss or you were coping with heavy debt, being able to demonstrate these issues are now under control is essential. Find steady employment, get your debt paid down, fix errors on your credit report and pay off any judgment issued against you as part of your repossession.
You'll probably be asked to make a down payment of at least 20 percent or more in order to qualify for a new car loan. Start saving cash to meet this requirement.
Consider a Co-signer
Auto financing companies are leery of applicants who defaulted on prior car loans, so getting a co-signer on board may help improve your odds of getting financed. A co-signer is an individual with good credit who is willing to vouch for you and agree to take over payments in the event you're unable to make them yourself. You may ask a spouse, family member or very close friend to take on this role for you.
This is a heavy burden to ask someone to take on, because if you default and they’re held responsible, it can damage their personal credit and financial security.
Shop for a Loan
Shop around for the best terms and rates. Be up front about your previous repossession and recognize that a lender will likely charge you a higher-than-average interest rate if it finances you at all. Go to your personal bank or credit union, as well as dealerships. Be wary of so-called bad credit lenders, as their rates and repayment terms can often be excessive and may hurt you more than help you.
Some bad credit lenders may try to get you to buy gap or life insurance or take extended warranties on car loans. Since you're already paying a higher interest rate, this means you're financing these extra fees over a long period of time. Bad credit lenders may also give you an excessively long loan, which leaves you paying for a depreciating asset over several years.
Don't be Picky
Be flexible about the make and model of car you're willing to take. A reliable used car will be significantly less expensive than a current model and can help keep your payment and insurance rates down in the event you're still facing financial uncertainty.
Check out these related posts